Strategy for the Telecommunications, Media and Technology industries

The case for ‘place as a platform’

Platforms have grabbed unprecedented attention in the digital era. This can be partially attributed to the hype surrounding internet-enabled platforms in every realm of commerce. A deeper reason that platforms have lately captured the attention and imaginations of business leaders is that they enable a “pull-based” approach to serving customers profitably. The opposite to this is a “push based” approach which requires anticipating customer demand and bringing the right resources and people to produce the right quantity of a good or service at the right time. This approach is efficient if the forecast is right… but this is a big ‘if’ – particularly in the industries that have a fixed physical space or place as the cornerstone of their business.

In recent times, pubs and restaurants in Sydney have experienced rising property, labour and supply costs compounded by increased competition and enforcement of ‘lock out’ laws (no new patrons after 130am). To illustrate the impact of these factors on hospitality, there was news recently of the sudden collapse of Sydney food and pub group Keystone, which runs the Australian franchise of Jamie Oliver’s Jamie’s Italian. The news article points to a simple story: “overreach in the competitive world of food and beverage and too much debt.” But, there is something more to it…The world has fundamentally changed since many of today’s venues (around the world) were established. How and where people choose to spend their time and money has fundamentally changed and the network of suppliers that support venues are now more digitally savvy than ever.

This post looks at the case for ‘place’ as a platform – or said another way:

The opportunity created for venues or physical spaces by the convergence of the digital and physical worlds providing layers of capabilities and standards that other players in that market can tap into and use.

To illustrate, the post will briefly run through four different characteristics of place as a platform. Before this, it is hard to talk about ‘place as a platform’ without mentioning the recent phenomena of Pokemon Go. Not to dwell on the features of the augmented reality game (as it has been covered in numerous blogs) but it demonstrates how the concept of ‘place’ is changing. Pokestops, lures and hosting Pokemon gyms in a venue (e.g. restaurants, museums, parks) is an example of how the physical and digital are melding together to create new uses for space and new ‘pull factors’ for venues characteristic of platforms.

Four characteristics of place as a platform

Pop-up vs Permanent

Many venues are founded with the intent of becoming permanent fixtures. This is best suited to a traditional world where people have a favourite place to go to or where affinity with patrons is created mostly by proximity to a venue. It is aligned to the “push model” of customer acquisition. Platforms however need not be permanent – by their very nature they are fluid in the way they bring new players (customers and suppliers) together to create value that is decoupled from a permanent fixture or focus. The growing trend in the retail industry towards short-term leasing and pop-up stores is an example. Pop-up stores aim to test new and alternative retail offerings with customers, maximising their returns in a short period of time. Large retail property companies like Westfield are embracing this trend creating space for short term leasing in their malls. The opportunity is to do the same in hospitality creating the conditions to maximise value in a short period of time through scarcity, exclusivity and test and learn principles.

On-demand vs Linear

Closely related to the concept of a pop-up venue is that of a venue on-demand. The ‘physical world’ has a lot to learn from the trend in media to on-demand content and ‘binge watching’. Traditional venues have opening hours, waitlists and queues. Platform venues are transparent, opening up their schedules, seating plans, customer details and menus. They are democratised by allowing customers to choose when they should open and what they should offer. They are also variablised – staffing up and stocking up based on demand rather than ‘potential demand’. To enable this, the economics of the venue need to be determined using on-demand principles (e.g. What is the number of people required to open the venue on Sunday at break-even or higher).

Participants vs Patrons

Participation is a common requirement for many internet-enabled platform businesses (e.g. iTunes, Airbnb). This can be in the form of membership to the platform or participation as a developer building on the platform. Membership helps to create stickiness and orients the platform around the pull vs. push mechanism for customer acquisition. It also supports the customer experience and alignment with the venue’s success. For places to become platforms, membership is likely to be a core enabler. This is not a new concept in hospitality, in fact is is very similar to many ‘clubs’ in the world. Consequently, membership allows for governance of the place as platform. Members agree to the terms of the platform and the experience is then fixed around those principles. Place as a platform will require a base level of membership but the opportunity to monetise off non-members (e.g. pay-per-use, extensions of place (e.g. food delivery from the kitchen)) then exists.

Then there are other participants outside of members – ‘the developers’. Companies like Deputy which helps businesses manage bespoke work forces or accounting software like Xero are ‘plugins’ into the venue. Place as a platform will allow many participants to ‘play’ in the physical space not just patrons.

Scale vs Single use

Platforms are scalable which is almost the exact opposite of how most venues are set up. Many hospitality businesses ‘fixed to place’ with the exception of franchise models which are formulas that can scale out across multiple places (e.g. McDonalds, KFC etc.). Redefining place as a platform requires a level of modularisation of the experience, products or services from the venue. Where possible these aspects should be digitised to allow for distribution and replication. For example, the sign-in/booking process and software, the member notification services or even the menu could be adopted by other venues.

There will always be a place for traditional venues – not every successful business is a ‘platform’. But the case for place as a platform is becoming clearer. The divide between digital and physical is closing which opens up new opportunities for places to interact with venue goers and suppliers in a platformatised, pull-based way. The venues that adapt by offering pop-up concepts, on-demand to participants (rather than patrons) and at scale, will be best place to capture value in a digital+physical world.